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#CaseoftheWeek Episode 33: Sanctions from Failure to Disclose a Witness in Initial Disclosures

The case we breakdown in episode 33 is Official Comm. of Unsecured Creditors v. Calprers Corporate Partners, 2021 WL 3024287 (D. Me 2021) from July 16, 2021. During the livestream of the ACEDS #CaseoftheWeek, our CEO Kelly Twigger discusses whether the failure to disclose a witness on a party’s initial disclosures can result in sanctions under Rule 37 and the exclusion of a witness from testifying.

Good morning and welcome to our #CaseoftheWeek for July 27, 2021. My name is Kelly Twigger. I am the CEO and founder of eDiscovery Assistant, which is an online practical resource platform for lawyers and legal support professionals who are engaging in electronic discovery. Also, the Principal at ESI Attorneys, which is our law firm, where we practice electronic discovery and information for our clients. Thank you so much for joining me this week.

As you know, if you join us each week, we do the #CaseoftheWeek series in conjunction with our partnership with ACEDS at eDiscovery Assistant and each week choose a recent decision in electronic discovery that highlights key issues for you to be thinking about in practice for your clients that can have a dramatic impact on the success of your litigation.

You’ll see a link to the decision, public link to the case as it exists on eDiscovery Assistant in the comments section of whatever platform you happen to be reviewing us on, whether that’s Twitter, LinkedIn, Facebook or YouTube.

You can also see a link to our 2020 Case Law Report. We’ll be repeating that again next year in conjunction with Doug Austin at eDiscovery Today and also encourage you to pop over to our website at eDiscoveryAssistant.com and sign up for our blog.

The series that we’re working on right now is a series on each of the elements that are included in our ESI protocol. We’ll be following that up with issues on search terms coming this week.

Let’s get into our #CaseoftheWeek for this week. Our decision this week comes from the case of Official Comm. of Unsecured Creditors v. Calpers Corporate Partners. This is a case that is taking place in the District of Maine and a decision from July 16, 2021 issued by Nancy Torresen, the United States District Judge and the first female judge appointed in the District of Maine in 2011 by President Obama.

Our case of the week this week highlights a new issue. It’s not a new issue, but it’s an issue that I think litigators like me who’ve been practicing for a couple of decades became sort of a non-thing in thinking about our initial disclosures. But that’s what I want to talk about — is initial disclosures and the potential ramifications for sanctions, for failure to disclose information on initial disclosures. It’s an issue topic that we’ve been starting to see a lot of over the last year in the decisions in eDiscovery Assistant. We’ve just recently added a tag for those cases. If you were taking a look at the issue tags associated with this case, you’ll see that there’s initial disclosure, sanctions, failure to produce, lots of different issues associated with not naming a witness on the initial disclosures.

Let’s kind of dive in here, but I do encourage you as we’re talking today, to be thinking about what you are doing on your initial disclosures as well as your duty to supplement.

The case in front of us is an emergency motion in limine about two weeks before trial is scheduled to start to preclude the testimony of a witness.  The witness’ name is David Crocker.

The underlying action that is going to trial is to recover fraudulent conveyances under the bankruptcy code. Essentially, plaintiff seeks to recover and avoid certain transfers that were made by the debtor that operated a paper pulp and tissue mill in Lincoln, Maine. This case is a little bit near and dear to my heart because I worked for a number of years at my former firm on the Fox River paper cases, associated with chemicals that were being put into the Fox River as a result of the paper making process. As we all know, because paper is not quite the commodity that it used to be, there’s a lot of issues associated with the mills. This case is not a surprise to those of us who are knowledgeable about the paper industry.

This particular decision invokes two sections of Rule 26 regarding initial and pretrial disclosures, and they’re ones that I want to highlight for us today to make sure that you’re really paying attention to what these mean.

A lot of times we engage in the initial disclosure process because we’re required to under Federal Rules of Civil Procedure (FRCP), but we’re not really using it as a tool or making sure that we’re supplementing it in the way that the Rules require. Let’s revisit those. 

Rule 26(a) requires three elements for initial disclosures—or four elements I should say—identifying witnesses who are likely to have discoverable information, providing a description of documents or ESI that may be used to support your case, damages calculation, and any coverage for insurance.

Now, obviously, the damages calculations and the insurance coverage don’t always apply to both parties. It’s really the witnesses and the description of documents that are the issues that we’re seeing in eDiscovery Assistant as sanctionable issues for failure to provide information whether related to identifying witnesses or identifying documents. Now, Rule 26(c) says that a party must produce their initial disclosures within 14 days of the Rule 26(f) conference. That means that you cannot wait to learn this information from your clients.

Again, one of our themes of the case of the week is prepare, prepare, prepare, get started early. You’ve got to be having these early initial discussions with your client and you can’t rely on your client to only be giving you the witnesses that you need. You’ve got to start your custodian interviews once you get that initial list of witnesses from your client and be able to to communicate directly with the client about expanding that list. You, of course, want to keep it narrowly tailored to what’s reasonable for the case. You don’t have to talk to every single person, but you need to make sure that those initial disclosures are reflecting the information that you’re learning in those interviews.

Now, Rule 26(e)(1) requires a party who’s made initial disclosures under 26(a) to supplement or correct their responses, “in a timely manner.” We see that come up in other cases, if the party either learns that information previously disclosed is incorrect or that there is additional information that has not been provided to the parties during the discovery process. That language is something that I want to come back to, because if there’s information not yet provided to the parties during the discovery process, that is a question of what does that mean? Does it mean that a witness just noticed it or mentioned it in a deposition? Does that mean that there were documents that were provided about that issue that should have caused the receiving party to know that there was an issue there?

What we’re finding through the case law related to initial disclosures is that as the party putting forth the information, you don’t really want to take that risk. You want to make sure that you’re supplementing your initial disclosures. If there’s your major take away from today’s discussion, it’s the importance of the initial disclosures and the duty to supplement them so that you don’t find yourself in a sanctionable position at trial, potentially losing a witness or certain testimony or documents because you failed to disclose them on your initial disclosures.

“In a timely manner.” What does that language mean? It means that if the party learns that in some material respect, the disclosure of a response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the parties in process or in writing or as ordered by the court. There’s no real discussion of what “in a timely manner” means. The time frame, of course, is always at issue in litigation and that’s something we’re going to talk about here.

Now, that’s the initial disclosure. You’ve got the duty to provide them under 26(a) and then you’ve got 26(c), which tells you you’ve got to supplement them.  Now 26(a)(3) governs pretrial disclosures. These are in addition to the initial disclosures. Now your pretrial disclosures require that you identify each witness separately that the party expects to present and may call if the need arises, that you designate the testimony that that party expects to present by deposition or a transcript of the pertinent parts of the deposition if that party is not going to appear in person, and third, an identification of each document or other exhibit, including summaries of other evidence by separately identifying those items that the party expects to offer if the need arises. Those pretrial disclosures have to be done 30 days before trial. So 30 days before trial, very key.

Initial disclosures are done with the purpose of making sure the other side has the information about who they need to talk to and what documents are going to be available that they need to be able to prepare for discovery. Pretrial disclosures are here’s what we’re going to do at trial, gives the other side the opportunity to be able to prepare for those particular witnesses of those documents to come into evidence. Two completely separate issues here, and we’re going to look at how the court examines those in the context of this case.

Now, here, the defendant moved to preclude the witness testimony of David Crocker after it alleged that the plaintiff failed to include the witness on the initial disclosures and its pretrial disclosures and did not disclose the witness until February 21, 2021 when trial was set to begin on August 5, 2021. A good six months. Well, not quite six months between the time that the information is disclosed in the time that trial is scheduled to start. The defendants ask that in the alternative of having the witness precluded at all, that they be allowed to depose him before trial. Now we’ll talk a little bit about the timing, but essentially, this motion was filed on July 12, 2021. Trial is scheduled to start on August 5, 2021. They’re cutting it a bit close.

Who’s a witness here and what really is the key to the testimony? The witness is, as I mentioned, David Crocker. David Crocker is a representative of the United Steel Paper, Forestry, Rubber Manufacturing, Energy Allied Industrial and Service Workers International Union, otherwise known just as the Union. The plaintiff wanted to call Mr. Crocker to testify about the history of the mill, the mill’s operations over time, the November 20 13 explosion, and changes to the mill’s operations following the explosion. The plaintiff noted that they anticipated testimony would last about an hour and was really contextual for purpose of their experts to be able to weigh in. Really, he’s just going to be laying a lot of foundation for what the expert’s testimonies are based on.

The defendants argued a couple of different reasons why the testimony should be precluded. One, they said that the plaintiff’s initial disclosures did not actually list David Crocker. That’s the first issue. The plaintiffs said, well, no, we didn’t list Crocker, but we did list the Union. And we said that we would likely have someone from the Union to be able to testify about these particular issues. The plaintiffs did not specifically identify David Crocker as that witness for the Union until February 2021, as I mentioned. When the plaintiffs disclosed the Union on their initial disclosures, they identify the Union as the entity that was, “likely to have discoverable information that the committee may use.” They provided contact information for the Union’s counsel and stated that the Union might have information related to the debtors’ financial condition and its operations during the relevant time period, as well as its decision to potentially sell the insurance claim. All of which are relevant to the potential of this money that was transferred that is alleged to be a fraudulent conveyance. We’re really trying to recover funds that were paid out to a debtor here that the business needs for other purposes.

Plaintiff included the listing of the Union on the initial disclosures, but again did not disclose the actual name of the witness from the Union that they would call until February of 2021. Subsequent to February 2021, the Court then notes that it held numerous pretrial conferences during which neither party raised the issue of Mr. Crocker testifying. Then on June 16th, in an email to defense counsel, plaintiff’s counsel specified the witnesses and which plaintiff intended to call live at trial. That list included Mr. Crocker, and that subsequently led to this emergency motion and limine that was filed on July 9, 2021. The judge then decided this really quickly on July 16th in advance of the August 5th trial date.

What did the court look at? What was the analysis here? The Court started with the language of Rule 26 on the initial and pretrial disclosures, as well as Rule 37. And we’ve gone through the language already of Rule 26. Let’s talk about Rule 37 says regarding sanctions for violations of the disclosure requirements. Rule 37(c)(1) states that “If a party fails to provide information or identify a witness as required under Rule 26(a) or (e) the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing or at a trial unless the failure was substantially justified or is harmless.”

Rule 37(c) also provides that a court can impose other sanctions in addition to or instead of this sanction. The Court then cites sections of the Rule saying that Court can order payment of reasonable expenses caused by the failure to inform the jury of the parties failure or impose other appropriate sanctions. Key here is that the District Court has the discretion to decide whether witness preclusion is an appropriate sanction here. That’s exactly what the Court did. They said, let’s look at when when it’s appropriate, and and they said preclusion is ordinarily appropriate for violations of 26(a) and 26(e) but “it is not strictly a mechanical exercise” and that, in its discretion, the Court needs to look at four different factors to determine whether or not witness preclusion is appropriate. Those factors that were determined by the First Circuit, which is of course where the District of Maine falls. Those four factors include 1) the history of litigation, 2) the sanctioned party’s need for the precluded evidence — so what is the value of the evidence to the plaintiff of David Crocker’s testimony here — 3) the sanctioned party’s justification for its late disclosure or lack thereof, and finally, 4) the opponent party’s ability to overcome the disclosures adverse effects — meaning what are the surprise and prejudice that are associated with the late disclosure. Then a fifth one that the Court also notes is the late disclosure and impact on the District Court’s docket.

The plaintiff, relative to these factors, argued that the identification of the Union in its initial disclosure really was sufficient to put the defendant on notice that it could have conducted a Rule 36(b) discovery deposition, and added that if the defendants had taken any action to engage with the Union, that would have led to an earlier identification of the Union’s representative.

The situation here is not an unusual one for litigation, particularly when you have a third party like the Union. You may not know who the best person is to be able to testify unless and until you start getting into conversations with the Union, start talking to counsel, start identifying what the actual needs are. A lot of time those needs aren’t very apparent until actually you’ve gone through the discovery in the rest of the case. It’s always very easy to engage in these discussions of was something done in a timely manner in hindsight, but you have to be contextual about it. That’s what the Court’s trying to do here by looking at these five factors.

The Court said to the defendants we agree with the plaintiff, that based on the information and the initial disclosure that the defendant could have identified and deposed Mr. Crocker before the close of discovery and that the initial disclosure also listed topics that are what form the basis for his anticipated testimony, including the mill’s operations. The court really sided with the plaintiffs on that particular factor.

The court also looked at and said, “hey, let’s assume that the plaintiff bears some responsibility for not supplementing its disclosures in a timely fashion”. Discovery had been closed for two years. This case had been filed for four years. Multiple delays in the case were due to Covid — trial being put off. The Court notes specifically that trial would have already happened if not for Covid. Those are really factors that that the Court builds into its analysis.

The Court looks at each one of those five factors in assessing whether or not sanctions are appropriate here or whether or not witness preclusion in this particular instance is appropriate. As I mentioned, history to litigation, discovery been closed for two years, delays of Covid. The Court also noted that the plaintiff had not had any previous violations of court order. There’s no pattern of misconduct by the plaintiff here that looks toward sanctionable conduct. There’s also no evidence that the plaintiff sought to gain any sort of tactical advantage. The history of litigation factor really weighs in favor of the plaintiff.

Next factor is the need for the testimony. The Court found that the basis of the testimony about the mill itself and not what actually happened to the office was crucial to the plaintiffs telling a story. That distinction comes in because the defense counsel argued that they had witnesses who would be able to provide the same information that David Crocker would provide. Of course, we all know that if you’re the plaintiff, you don’t want to rely on the defense witnesses to put in the information for your case in chief. That argument was a little suspect, but the Court rejected it.

Next step. What’s the defense for having late disclosure? The plaintiff essentially says, “we don’t have a defense. We did disclose it. We put it in our initial disclosures that we were going to have someone from the Union the basis for the testimony. We don’t need to have a defense here because we did disclose it.” The Court agrees with them. The Court says, “you did disclose it. Defense counsel should have had an opportunity to follow up and they did not take that opportunity.”

Next factor, prejudice to the defendants. Defendant says the prejudice exists because they didn’t get to take Crocker’s deposition and that they assert sort of as a broad brush, “where a party is deprived of the opportunity to take a witness’s deposition because of nondisclosure, the party would be prejudiced by the admission of such witness’s testimony.” Plaintiff again says, “look, we told you about David Crocker in February and you haven’t tried to contact him. You haven’t asked us. He didn’t call the union. You’ve had six months basically since we identified him and you still didn’t do anything about it.” The Court really looks at that timeline, the fact that the Union was disclosed and that the defendant took absolutely no steps to contact him or ask him about upcoming testimony, as well as the fact that the basis of the testimony is factual, it’s contextual, and that it’s essentially going to be less than an hour. We’re having this whole argument for testimony that’s going to be less than an hour of trial. Based on all those things the Court found, that there was very minimal prejudice to the defendant and that was not a factor that was going to tip them in favor of sanctions.

The Court also found that the defendant has really no persuasive argument that it was recently surprised by the plaintiff’s confirmation that it intended to call Crocker because of the disclosure on its initial disclosures three years earlier in 2018.

As to the fifth factor, the impact on the Court’s docket, the Court found that if the parties had raised this issue earlier, then it could have been dealt with much more efficiently. I think the Court was a bit frustrated by having this emergency motion in limine for an issue that should have been raised much earlier. I think that really speaks to the nature of litigation. We talk about that a lot on the #CaseoftheWeek.

There’s so many things that are happening all the time in litigation and Covid has thrown all of us for a complete loop. We don’t quite have the ability to focus that we had previously. None of this is news to anybody who’s been trying to practice law during this entire pandemic. Focus is not necessarily there. We’ve got so many things that are happening in our life outside of practicing law that haven’t normally been those kinds of stressors. Just the ability to stay on top of all of these kinds of details has been, or I should say, the inability or the challenges associated with staying on top of all of the details of litigation have been exacerbated by Covid. There’s absolutely no question about that.

In terms of how the Court looked at that, related to the facts of this case, the Court basically said, given the lack of significant prejudice to the defendant from the delay, permitting Mr. Crocker’s testimony or given the lack of any sort of clear discovery violation or bad faith on the part of plaintiffs, and the defendants delay in raising this issue, it’s too severe a sanction to consider witness preclusion. The Court denies the witness preclusion. What the Court does say is the defendant’s free to contact Mr. Crocker and ask him about his testimony, or they may be able to reach some other alternative with opposing counsel. If Mr. Crocker is unreachable or unwilling to talk, then the defendant can refile its motion, and the Court will consider authorizing a short video deposition. The Court really does this very practically. Trial is coming up. Defendants had the opportunity. They didn’t take the opportunity. So take it now. If there’s a problem, come back to me and I’ll order a deposition. Essentially, no sanctions granted here for potential failure to disclose information on the initial disclosures.

I think when we look at takeaways for this case that it’s really important to stay within the bounds of the facts that exist here. We’re going to cover some additional decisions on this same issue of failure to disclose information in the initial disclosures more in the future, because I want to pick out other factual scenarios where there is a real failure to disclose and there are sanctions that issue so that you can compare and contrast those with the decision here in Calpers, because the facts, as always, are what are really crucial here. Had the plaintiffs not made the disclosure of the Union on their initial disclosures, I think it’s pretty clear that based on the factors that we just went through in when sanctions are appropriate under Rule 37 for failure to disclose on initial disclosures that there would have been an exclusion of witness testimony here. That is never a sanction that you want to incur prior to trial. It’s something it’s very hard to defend to your client. It’s something that is easily avoidable.

We’ll deal with some subsequent issues here. But the key is you’ve got to prepare for and provide key information in your initial disclosures. You’ve got to remember that you have a duty to supplement those initial disclosures. Whatever you need to do to remind yourself of that—whether you set weekly reminders on your phone or your calendar at the office, whether you set a reminder after every single deposition to consider whether there’s any new information that needs to be added to initial disclosures any time you produce documents.

I think there’s a real concern with the language under Rule 26 as to when you learn information and whether the other party is actually on notice of that information as to what your duty to disclose is. I think there’s a really fine line there, and we’ll look at some more cases in the future so we can continue to do that analysis. Don’t allow those initial disclosures to be a throw away aspect of litigation that is really, really important. That’s what we want to take care.

Know and understand the factors if you do leave something off and be able to get it in front of the Court ASAP. Identify it to the other side. Be clear and up front that you’re adding new information to the initial disclosure. Anticipate that there may likely be some sort of motion to preclude, whether it’s documentary evidence or witness testimony based on a failure to disclose and be prepared to analyze your case under those factors that we just discussed here, it’s important to note that the testimony was background for context and not really key evidence to the case, but it could have been a lot more crucial.

I mean, we’ve all had that situation where you’ve done all your custodian interviews, nobody’s name ever comes up. And then suddenly, two years into the case, a new witness is identified and nobody ever the said the name or it might have been on the periphery. Someone might have mentioned it, but it was never an issue. Suddenly that becomes the issue. Be aware of those things. Focus on them, and don’t lose sight of them in all of the detail and the trees that we call them in litigation.

When you receive initial disclosures, read them and follow up here. The defendant could have immediately inquired whether or who would have been called from the union when they received initial disclosures way back in 2018. All of this could have been avoided. We talked about the role that Covid played with respect to this particular case. I think that we’re going to continue to see that role of it in the pandemic impact decisions that we’re going to see in discovery probably for the next two to three years just because of how far behind the courts are on dockets. Hopefully, we get back to to some sense of normalcy and what would be reasonable times to provide information under initial disclosures.

One aspect of Rule 26(e) that I think I mentioned earlier, and I want to make sure we have as a takeaway here, is that the disclosure is required where information that has not otherwise been made available to the parties, to the discovery process. And I mention that because what does that mean? How minuscule does the mention have to be or how grandiose or how important does the mention of that information have to be? Does it mean that if I produce two hundred documents about a particular topic, that that’s enough notice out of 50,000 documents for a defendant or a receiving party to be on notice of that particular issue or that particular person who may not be what we call a custodian. It may not be someone whose documents we collected as a custodian, but it may be another person who is listed on several hundred or several thousand documents that the other side never, never caught up to. They never notice that that information was there. And so that question under Rule 26(e) is how much disclosure within the discovery process really meets that burden in Rule 26(e), such that you don’t have to have it listed on a supplemental initial disclosure. My advice is to make sure that you are supplementing your disclosures. If you’ve provided documents, make sure that you’re making strategic decisions about whether or not you want to include additional folks or additional documents on those initial disclosures. There are strategic ways to think about that. Keep that in mind. Know that you’ve got a potential sanction here if you’re not making those disclosures in a way that the Court believes that you should be.

All right. That’s our case of the week for this week. Thanks so much for joining me. I’ll be back next week with another decision from the eDiscovery Assistant database. If you are an ACEDS member and interested in using a discovery system, there is a discount available to current ACEDS members and a trial for folks taking the ACEDS exam. If you’re interested in either of those, please drop us a line at ACEDS@ediscoveryassistant.com and one of our team will be in touch.

If you are looking to do a trial for studying for the ACEDS exam, for your CEDS certification, please make sure to mention that in the email that you send us before we can set you up for the trial.

If you are not an ACEDS member but are interested in doing a trial of the eDiscovery Assistant database or want to join, you can sign up at eDiscoveryAssistant.com. In the upper right hand corner, you’ll see a link to the free trial link. You can sign up directly there or you can reach out to our team at support@ediscoveryassistant.com and one of us will get you started.

Thanks so much. Have a great week. Stay safe and healthy and I’ll see you next week.

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